Hey, That's No Way to Say Goodbye

Well, here we are two full months into the legislative session with not a single PERS bill having gotten a committee work session.  Most of the action is taking place in the Senate Workforce Committee, where Senator Kathleen Taylor has been running a very tight ship.  There have been four or five information sessions on various PERS bills with various experts and attorneys, but no work session scheduled on any bill through agendas posted for as late as April 3.  While it is too early to write these bills off, it certainly appears that few will survive this year’s legislature.  However, the most likely candidate is Senate Bill 560, which has already been substantially changed by gutting pages 2-16 of the original bill, and with 7 amendments replacing the gutted part.  The 6% pickup diversion is unlikely to fly, not because of constitutional issues, but because of union issues.  We learned from testimony on March 22, that SEIU has had language going back to the origin of the pickup (1979) calling for a salary increase to offset any requirement that the employee pay his/her own 6% from salary.  SEIU negotiated a contract in 2016 that has members paying their own 6% pickup, while the state gave a 6% raise to offset it, plus another 0.95% in cost-of-living increases.  We don’t know the status of other contracts, especially for local bargaining units, but likely has similar language in their contracts, or unions will use SEIU’s leverage to obtain a similar deal.  That leaves the FAS cap of $100,000, the five-year FAS computation (instead of 3), the totally confused idea to cap the annuity rate on retirement (I say confused because the clear intent of this is to limit the annuity rate for future Money Match retires, which are fewer and fewer in number, but the bill isn’t worded that way).  That drew a rebuke from Steve Rodeman, Executive Director of PERS, who cautioned the committee that they really didn’t want to go where the bill was heading, simply because annuity rates figure in all sorts of calculations.  He urged the Committee to work with him and Legislative Counsel to get the wording right; otherwise, the bill is courting difficulty.  Other pieces of the bill would cut the statutory formula rate (currently 1.67% for Tier 1 regular; 2% for P&F; ditto for Tier 2; lower for OPSRP) from its current level to 1.0% for general service, and 1.2% for P&F.  These are serious cuts, but would apply only to service performed on or after 1/1/2018.

 The theoretical “drop dead” date for bills to get a hearing is April 18, 2017.  Of course, there are a variety of parliamentary maneuvers that can extend the deadline all the way to sine die on July 8, 2017.  So, there is no reason to become complacent about the April date, although it may give some breathing room to those inclined to anxiety disorders.

People continue to ask me about “best” dates to retire.  I wish I could give a definite answer, but every situation is unique.  The only piece of SB 560 that doesn’t take effect on January 1, 2018, is the decoupling of the Money Match annuity rate from the assumed interest rate.  That piece is currently structured to take effect on passage, which could be anytime after May 1, 2017.  But that particular piece requires redrafting to remove the complex language that Rodeman warned against; that will require time.  Taylor and Knopp (committee vice-Chair) have agreed that they have to make decisions about bills to move to work sessions within the “…next three weeks”.  But complicating (or not, depending on your viewpoint) their decisions are some hard political realities.  After 2013, the Democrats don’t want to be tarred with another failed attempt to reform PERS.  In 2013, they sold their souls to the devils, Kitzhaber and the Rs in the Legislature, to achieve two different objectives - reforming PERS and providing small business tax cuts.  The Ds favored the former; the Rs the latter.  The “Grand Bargain” was struck when those two pieces secured enough opposition votes to pass both.  Unfortunately, the PERS cuts were largely overturned by the Supreme Court, while the latter quietly got lost in the shuffle and now add to the state’s growing deficit.  The Ds learned their lesson from that experience, and aren’t likely to agree to more PERS cuts without the Rs coming along with them on measures to raise revenue (some sort of Corporate tax), and also a transportation package to fix Oregon’s crumbling roads and highways.   The PERS bills are all R bills this time; they can’t pass without a couple of Ds going along.  To get out of committee, SB 560 needs all Rs and at least one D.  To pass in the House, all the Rs have to go along, and at least 4 (or 5) Ds have to go along, as well as the Governor.  But, those votes won’t come without R cooperation on the two big D objectives this session.  There will be a lot of back room deals being cut.  The reason for this extended sojourn into the political theatre, is to underscore how hard it will be to handicap the likelihood of PERS reform passing in the absence of these other pieces.  Thus, if you think you are going to retire under Money Match (remember, this isn’t YOUR choice; PERS chooses the best outcome for you), you may want to give serious consideration about going no later than May 1, 2017 (right now potential FF retirees aren’t protected under the current version of the 560-3 amendment, but we are optimistic this will change once Rodeman and LC get involved with the committee) because of the possibility that SB 560 will pass into law between May 1 and July 8 (no predictions offered there; you are on your own).  If you KNOW you aren’t going to retire under Money Match, then it is probably safe to wait until after the Legislature adjourns but not any longer than December 1, 2017.  If you are in doubt, be sure to do, at least, the PERS online estimator.  You might be surprised.  (It goes without saying that the PERS Coalition intends to litigate any changes; but this will present somewhat of a generational conflict, since many of the changes will affect younger OPSRP workers much harder than the “lame duck” Tier 1 and Tier 2 members).

To cap this epistle, I recall a line uttered by Senator Laurie Monnes Anderson (D) when she remarked that “…I guess the best thing would be for Tier 1's to die”.  She regretted it the moment it came out, but it is an unspoken truth, so those of you who are Tier 1 (retired or otherwise) now know how the Legislature really feels about you.  And I say, longevity and health are the best revenge.  Or in the words of Chris Smither, “hey, that’s no way to say goodbye”.